Which of the following contributed to high levels of inflation in the 1970s?
i. Soviet invasion of Afghanistan
ii. Loose monetary policy
iii. A productivity slowdown
A) i only
B) ii only
C) iii only
D) i and iii
E) ii and iii

Question

Quizplus · Accepted Answer

Loose monetary policy by the Federal Reserve led to an increase in the money supply and demand for goods, while the productivity slowdown restricted supply of goods, creating a situation of excess demand and rising prices. The Soviet invasion of Afghanistan had some impact on oil prices, but was not a major driver of inflation.

Which of the Following Contributed to High Levels of Inflation